Influence Of Shadow Banking On Commercial Banks’ Fragility

The shadow banking system is developing rapidly. And it already has become an important part of the financial system. It will influence Chinese commercial banks’fragifility inevitably. On the one hand, shadow banking system itself has high leverage and maturity mismatch which full of risks. The system is also a strong competition to traditional commercial banks at the same time. On the other hand, there is a partnership between shadow banking system and commercial banks. Besides, the continuous development of the shadow banking system also penetrated into the interior of commercial banks to influence the fragility of commercial banks. Therefore, study the influence of shadow banking system on commercial banks’fragility has a profound meaning and can provides theoretical basis of management and recommendations of shadow banking system. So we can also give some suggestions to the commercial banks and maintain the stability of the entire financial system as well.Basic on the annual data from 2004 to 2014 and lots of literatures, we measured the whole scale of the shadow banking system according to its compositions. Then, for the fragility of commercial banks, we made an innovation on the basis of the existing literature. From the micro perspective, we used entropy method to measure the fragment of commercial banks. This method is very objective. Then, we constructed four models respectively and used dynamic panel GMM to prove the relationship between the shadow banking system and the commercial banks’fragility, and we have changed the argument to different three components of shadow banking system to inspect deeply. The main conclusions of this paper are as followings. The scale of the shadow banking system in China is growing year by year although it is slowing down these years. The fragility of Chinese commercial banks is increased year by year. In the basis of the mechanism of the shadow banking systems’and its different parts’impacts on the commercial banks’ fragility, we proofed that the influence of the development of shadow banking system on Chinese commercial banks’fragility is positive. In other words, the larger the shadow banking system is, the more vulnerable the commercial banks are. Further, the internal-external shadow banking and the external shadow banking have a significant positive influence on the fragility of commercial banks. But at the same time, the internal shadow banking doesn’t have a significant effect on the fragility of commercial banks. These conclusions will apply a correct view of the shadow banking system, improve the shadow banking supervision system, and promote a healthy development of commercial banks. At the end of the paper, we provided some suggestions based on the empirical results. We should establish a sound legal system, so that the shadow banking will develop moderately. To control the negative impacts on the fragility of commercial banks, we should complete the related regulatory system. At the same time, the commercial banks should control the risk of shadow banking which they has participated in. At the same time, commercial banks should seek new profit growth point and enhance operational efficiency actively in order to reduce its fragility. Finally, to manage different parts of shadow banking system with different methods, so as to promote the development of financial and the real economy.